Is there an upcoming move in your future? Whether you’re relocating for a new career or just seeking a change in your life, moving can be a very exciting experience. However, you may have some big decisions ahead of you. The toughest by far is what to do with your existing home.
Selling might be the obvious choice. Housing prices remain high, even after falling somewhat since early 2022. If you purchased your property even a few years ago, you are almost certain to make a significant return on your investment.
Then again, you’ve undoubtedly heard about the benefits of keeping an investment property for passive income and long-term equity growth. Perhaps you should hold on to your existing home and buy a second one. What is the best choice for you? Everyone’s situation is different, and selling or renting your existing home both have advantages and disadvantages.
Keeping Your Home to Rent
Keeping your existing home as an investment can be one way to secure your financial future. Even when housing prices drop, they rarely stay low for long and the long-term trend is always up. Owning two or more properties can mean your equity grows faster as real estate values increase over time.
With new immigration targets and a growing population, the demand for rental units could soon be greater than ever. Add monthly rental income to the equation, and the idea of becoming a real estate investor becomes even more appealing. What are the downsides?
It can be more expensive than you realize to keep a second home as a rental property. You must factor in the monthly carrying costs, especially when the house is vacant while you search for a tenant.
There are also maintenance and repairs, insurance costs, and legal fees to consider. Collecting enough rental income to cover these expenses with some funds left over can prove challenging, especially with the high housing prices today.
Is investing the right decision for you? The following resources will help you be successful:
- A Guide to the Residential Tenancies Act for New Landlords
- What To Know Before Becoming a Landlord
- How to Sell an Investment Property
Are You Ready to Be a Landlord?
Keeping your home can be a great option when you find the right tenant. Note the operative words – the right tenant. If you end up with someone who doesn’t pay rent on time or damages your property, you could be in for a world of headaches. You can try to evict them, but the process is often long and leaves you without rental income in the meantime.
The fear of bad tenants is one of the biggest deterrents many people have to becoming landlords! However, vetting potential tenants thoroughly reduces this risk. Though there are no guarantees, performing background checks and talking with previous landlords are simple steps you can take to protect your investment.
Can You Finance a Second Property?
Holding on to your property can be even more expensive than you realize, something that becomes evident when purchasing a second home. In Canada, you need at least a 20% down payment on an income property, even if the price is $1 million or less.
Although you could use your existing home as collateral for a second mortgage, not everyone wants to assume the risk.
Selling Your Home
If you don’t want the risk or the work that goes along with renting out your existing home, selling may be the best option. Still, the uncertainty of the market has some homeowners hesitant to let go of their property. What if you sell now only to see housing values rise in the coming months? It’s one of the questions we get asked most often, and there are three things to consider.
- If you’re selling and then buying a house right away, a change in the market doesn’t affect you. If prices rise later, you will have earned more money from your sale. But your new house would also cost you more.
- Housing prices might rise. But they could also drop even further, which means you earn less if you wait.
- Even if prices fall, your loss is intangible. Unlike investing in real estate, where you stand to lose real money, selling your home is nearly risk-free. What does this mean? Imagine you bought a house in Burlington ten years ago for $500,000. During the housing boom of early 2022, average prices peaked at approximately $1.3 million. As of February 2023, they now stand at about $989,000. It might be tempting to look at what could have been. However, why not look at the gain instead? In ten years, the value of your house has almost doubled!
Selling your house after building years’ worth of equity can open many doors for you. You could upgrade to a larger home or downsize and pocket the difference. Alternatively, you can invest those extra funds in a new business venture or enroll in continuing education. The possibilities are endless!
Depending on your situation, selling your home and moving on might be the best choice. In that case, these resources will help you get started:
- The Power of Staging When Selling Your Home
- Minor Upgrades, Maximum Results
- What’s Your House Really Worth?
Achieving the Best Possible Results From Your Sale
If you decide selling your home is the right option, your next step is making a plan to help you get the best possible results.
If you have time to spare, you can clean, declutter and make minor updates that catch the attention of potential buyers. Effective staging has also been shown to increase the final price and often leads to a faster sale.
If you need to sell quickly, you may not have time to handle the home preparations that can lead to the highest selling price.
In either case, a full-service real estate team could handle all these details on your behalf. Local experts can help you earn the highest return on your investment with the least amount of effort on your part. This level of service and expertise is essential, especially when you have a busy schedule or family life.
Do you still have questions about selling your home or using it as an investment? We work with buyers, sellers, and investors all over Burlington, Hamilton, Waterdown, and Flamborough and are happy to help you weigh your options. Reach out to us right here or call 905-332-9223 to connect to our offices today.